The government has given savers a way to avoid the minimum pension age increase in 2028 under new rules which allow individuals to keep their protected pension age if they transfer.
In its consultation response on how to implement the normal minimum pension age increase, published today (July 20), the government provided a window for people to lock in the current minimum pension age of 55 as long as the scheme they are in has this written into its rules.
Draft legislation will give individuals an opportunity to join a pension scheme by April 5, 2023, where the scheme rules state that the member has an unqualified right to take pension benefits below the age of 57.
It was first announced in 2014 that the NMPA would increase to age 57, effective from April 2028, to reflect long-term increases in longevity and changing expectations of how long people will remain in work and in retirement.
The government had initially failed to address individual transfers in its consultation published earlier this year (February 2021).
This consultation set out proposals about who would be eligible for a protected pension age and the circumstances in which someone could lose this.
The government said due to their special circumstances, members of the police, firefighters and the armed services would automatically have protected pension ages even if their scheme rules did not state this.
The consultation also proposed that members should keep their protected pension age when they become a member of another scheme on a block transfer, but it did not address individual transfers.
Respondents challenged this saying that these transfers were being treated differently and the protected pension age should not act as a barrier to transfers.
Steve Webb, partner at LCP said: “We have known for some time that the government was planning to raise the standard minimum age for accessing a pension from 55 to 57. But today’s announcements provide a window for people to lock in to age 55 if they wish.
“Schemes which already have a right to access at 55 written in to their rules will have this protected even after the 2028 change, and other savers may be able to join such schemes.
"As a first step, pension savers should find out where their own scheme stands. If their own scheme’s access age will rise to 57 they may wish to review where they hold their pension savings”.
But Jon Greer, head of retirement policy at Quilter, said the rules will add extra complexity to the pensions world.
He said: “This regime could have a material impact on members' decision to transfer, and also on the complexity of administration for pension schemes and ease of communication to members.
“While good natured in the approach, given the added complexity of these new regimes, we may well still ask whether the increase in the NMPA is really worth it.”
Meanwhile, there were concerns raised that a higher NMPA could help pension scammers, who could encourage people to transfer so they can get their benefits before the age of 57.
In its response, the government stated: “The Department for Work and Pensions has recently consulted on regulations to limit the statutory right to transfer in certain circumstances, including where there are signs of a scam.
“An incentive to transfer, such as the promise of accessing pension savings before NMPA, is considered a red flag under the regulations and will allow trustees to prevent a transfer from proceeding.”
amy.austin@ft.com
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